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Edited version of private advice

Authorisation Number: 1012622876182

Ruling

Subject: Fringe benefits tax

Issue 1

Question 1

For each of the itemised expenses for which the employee claims a reimbursement or payment in Scenario 1, which items are exempt from fringe benefits tax (FBT) under the provisions of Division 13 (Miscellaneous exempt benefits) or Division 14 (Reduction of taxable value of miscellaneous fringe benefits) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answers

Question 2

For each of the itemised expenses for which the employee claims a reimbursement or payment In Scenario 2, which items are exempt from fringe benefits tax (FBT) under the provisions of Division 13 (Miscellaneous exempt benefits) or Division 14 (Reduction of taxable value of miscellaneous fringe benefits) of the FBTAA?

Answers

Question 3

For each of the itemised expenses for which the employee claims a reimbursement or payment In Scenario 3, which items are exempt from fringe benefits tax (FBT) under the provisions of Division 13 (Miscellaneous exempt benefits) or Division 14 (Reduction of taxable value of miscellaneous fringe benefits) of the FBTAA?

Answers

Question 4

For each of the itemised expenses for which the employee claims a reimbursement or payment In Scenario 4, which items are exempt from fringe benefits tax (FBT) under the provisions of Division 13 (Miscellaneous exempt benefits) or Division 14 (Reduction of taxable value of miscellaneous fringe benefits) of the FBTAA?

Answers

Issue 2

Question 1

For any non-exempt FBT items, if the cost is under $300 could it be considered exempt from FBT under the minor benefit provisions of section 58P of the FBTAA?

Answer

Generally no, it depends upon the circumstances in each instance. See the reasons for decision.

This ruling applies for the following periods

1 April 2011 to 31 March 2012

1 April 2012 to 31 March 2013

1 April 2013 to 31 March 2014

The scheme commenced on

The scheme has commenced

Relevant facts

The following is drawn from the information provided with your application and in correspondence.

From time-to-time the entity (as the employer) relocates employees from one part of an Australian state to another part of the state in order for the employee to take up a new position. Although the circumstances vary for each relocation there are four general scenarios that commonly arise.

The four separate relocation assistance scenarios are as follows:

Scenario 1: An existing employee who rents a property in their home town, relocates to a different part of the state, and rents a new property after relocating.

A full-time employee, living and working in a country town, is permanently appointed to a position in another part of the state. The employee does not own a home and does not intend to purchase a home at the new location. Prior to the appointment, the employee, spouse and two children of primary school age occupied a rented house.

A telephone service was provided to the unit of accommodation that was the employee's usual place of residence immediately before the change to the employee's usual place of residence which was required in order to perform the duties of that employment.

The employee is notified in writing on 15 October 2011 that they will commence in the new position on 15 November 2011. The family visits the new location in early November and incurs expenses for lunch and dinner as part of their search for suitable accommodation. As suitable long-term accommodation is not available temporary rental accommodation is used for the first two months. The rental of that temporary accommodation commenced on 8 November 2011. In January 2012 the family moves to long-term rental accommodation and the children commence at their new school soon after.

After the presentation of receipts the following is reimbursed to the employee:

A "Relocation Allowance" of $1,000 is also paid. This payment is designed to compensate the relocated employee for damage or wear and tear on items during the move to the new location, regardless of whether receipts are presented or not. In this case the employee presents a receipt for $400 for repairs to a sofa on which the fabric was torn during the move. No other receipts are presented.

Scenario 2: An existing employee who owns a property in their home town, relocates to a different part of the state, and buys a new property later selling his/her old property 14 months after relocating.

A full-time employee, living and working in a country town, is permanently appointed to a position in another part of the state. At that time the employee and family including two children who attend primary school lived in their own home.

The employee is notified in writing on 15 October 2011 that they will commence in the new position on 15 November 2011. The family visits the new location in early November and incurs expenses for lunch and dinner as part of their search for a new house to purchase.

The employee provides the employer with a declaration setting out the particulars of the car and the number of whole kilometres travelled in providing the relocation transport. The benefit paid in respect of the use of the employee's car to visit the new location is on a cents per kilometre basis in accordance with the actual distance travelled. This benefit is at a rate which does not exceed the sum of the basic car rate plus the supplementary car rate as prescribed in section 61B.

Temporary accommodation is rented for two months during the search for suitable accommodation. Note that lease payments for this temporary accommodation commence not more than 7 days before the relocation day.

A new house is then purchased with settlement in January 2012. The family then moves to the new house and the children commence at their new school soon after.

A telephone service was provided to the unit of accommodation that was the employee's usual place of residence immediately before the change to the employee's usual place of residence in order to perform the duties of that employment.

The employee's original home is sold (settled) in January 2014, that is, 14 months after commencing work at the new location.

After the presentation of receipts the following is reimbursed to the employee:

- solicitor's fees of $1,000

-- commission and advertising charges of $10,000

-- mortgage discharge and associated administrative fees of $1,000

- solicitor's fees of $1,000

-- stamp duty of $20,000

-- mortgage registration and associated bank fees of $1,000

Scenario 3: An existing employee who owns a property in their home town, relocates to a different part of the state, and buys a new property later selling their old property 25 months after relocating.

A full-time employee, living and working in a country town, is permanently appointed to a position in another part of the state. At that time the employee and family including two children who attend primary school lived in their own home.

The employee is notified in writing on 15 October 2011 that they will commence in the new position on 15 November 2011. The family visits the new location in early November and incurs expenses for lunch and dinner as part of their search for a new house to purchase. Temporary rental accommodation is used for the first two months during the search for a new house. Note that lease payments for this temporary accommodation commence not more than 7 days before the relocation day. A new house is then purchased with settlement in January 2012. The family then moves to the new house and the children commence at their new school soon after.

A telephone service was provided to the unit of accommodation that was the employee's usual place of residence immediately before the change to the employee's usual place of residence in order to perform the duties of that employment.

The employee enters into a contract for the sale of the employee's original home after 15 November 2013 with settlement of that contract in late December 2013. That is to say that the sale of the original home took place 25 months after commencing work at the new location.

After the presentation of receipts the following is reimbursed to the employee:

- solicitor's fees of $1,000

-- commission and advertising charges of $10,000

-- mortgage discharge and associated administrative fees of $1,000

- solicitor's fees of $1,000

-- stamp duty of $20,000

-- mortgage registration and associated bank fees of $1,000

A Relocation Allowance of $1,000 is also paid. This payment is designed to compensate relocated employees for damage or wear and tear on items during the move, regardless of whether receipts are presented or not. No receipts are presented.

Scenario 4: A new employee who rents a property in their home town, relocates to a different part of the state, and rents a new property after relocating.

A person commences employment and undertakes an initial training course at the employer's premises. New employees are treated as probationary employees and are paid a salary during training. Prior to completion of the training course the employees are formally advised of the location to which they will be posted. The employee's posting in this case is to a regional town some 700 kilometres from their home town. In their home town the employee lives in a rented property and intends to rent a similar property at the new location.

The employee is notified in writing on 15 October 2011 that they will commence at their first placement on 15 November 2011. The employee visits the new location in early November and incurs expenses for lunch and dinner as part of the search for suitable accommodation. As suitable long-term accommodation is not available temporary rental accommodation is used for the first two weeks. Note that lease payments for this temporary accommodation commence more than 7 days before the relocation day. The employee then secures long-term accommodation and enters into a 12 month lease agreement.

After the presentation of receipts the following is reimbursed to the employee:

Assumptions

1. Documentary evidence of the recipient employee's expenditure is obtained by the recipient employee and that documentary evidence, or a copy, is given to the employer before the declaration date. This is in terms of paragraph 58B(1)(e); paragraph 58C(2)(d); paragraph 58C(3)(g); paragraph 58D(1)(d); paragraph 58D(2)(d) and paragraph 58F(c)(ii).

2. The benefit is not provided under a non-arm's length arrangement. This is in terms of subparagraph 58B(1)(d)(ii); paragraph 58C(2)(c); paragraph 58C(3)(h); subparagraph 58D((1)(e)(iii); subparagraph 58D(2)(e)(ii) and subsection 143A(g).

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986

Section 17

Subsection 17(4)

Paragraph 17(4)(c)

Section 20

Section 22

Subsection 22(c)

Section 58B

Subsection 58B(1)

Section 58C

Subsection 58C(1)

Subsection 58C(2)

Subsection 58C(3)

Subsection 58C(5)

Section 58D

Subsection 58D(1)

Subparagraph 58D(1)(e)(ii)

Subparagraph 58D(1)(e)(iii)

Subsection 58D(2)

Subparagraph 58D(2)(e)(ii)

Section 58F

Subparagraph 58F(c)(i)

Section 58P

Subsection 58P(1)

Paragraph 58P(1)(e)

Paragraph 58P(1)(f)

Section 61B

Section 61C

Sub-subparagraph 61C(1)(a)(i)(A)

Paragraph 61C(1)(b)

Paragraph 61C(1)(d)

Paragraph 61C(1)(e)

Paragraph 61C(3)(a)

Subparagraph 61C(3)(b)(ii)

Subparagraph 61C(3)(c)(i)

Subparagraph 61C(3)(c)(iv)

Section 62

Section 136

Subsection 136(1)

Section 143A

Paragraph 143A(a)(ii)

Paragraph 143A(c)(iii)

Paragraph 143A(d)(iii)

Subsection 143A(e)

Subsection 143A(f)

Subsection 143A(g)

Income Tax Assessment Act 1997

Section 15-2

Section 26-30

Section 28-13

Taxation Administration Act 1956

Subsection 12-1(3)

Reasons for decision

All legislative references are to provisions of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) unless otherwise specified.

Issue 1

Question 1

Scenario 1

Summary

The relocation expenses reimbursed to the employee have been examined in detail below and the decision on each is as follows:

Detailed reasoning

Relocation expenses come within the terms of miscellaneous exempt benefits in Division 13 or the reduction of taxable value of miscellaneous fringe benefits in Division 14 as follows:

There is no exemption in the legislation for this benefit.

Question 2

Scenario 2

Summary

The relocation expenses reimbursed to the employee have been examined in detail below and the decision on each is as follows:

Detailed reasoning

Question 3

Scenario 3

Summary

The relocation expenses reimbursed to the employee have been examined in detail below and the decision on each is as follows:

Detailed reasoning

(b) Family meal expense of $250 (during the visit)

(c) $60 for petrol used during the visit

(d) Connection/re-connection fees for electricity, gas, water and telephone services of $400

Example 7.1

Question 4

Scenario 4

Summary

Detailed reasoning

This scenario differs from each of the preceding scenarios in that unlike those other scenarios in which the employee had a spouse and children the employee in this scenario is a single person.

(a) Furniture removal fees of $3,000

Section 58B in Division 13 exempts from fringe benefits tax the benefit in relation to removals and storage of household effects as a result of relocation. This is subject to the conditions as set out in subsection 58B(1) being met.

Subsection 58B(1) exempts the benefit provided in respect of the employment of the employee:

the benefit is an exempt benefit in relation to the year of tax.

(b) Meal expenses of $200 (incurred during the search for accommodation)

(d) Rental bond of $1,200

Issue 2

Question 1

Summary

Section 58P provides that minor benefits will be treated as exempt benefits subject to specified criteria being met.

A minor benefit is defined as a benefit with a notional taxable value less than $300.

In the scenarios presented the benefits provided in respect of the connection/re-connection of the water supply in scenarios 1, 2 and 3 as well as the school uniform expenses in scenario 3 fall for consideration under section 58P.

In each instance on balance, having regard to the way in which the criteria in paragraph 58P(1)(f) are met, it is concluded that it would be unreasonable to treat the benefit as a fringe benefit.

Detailed reasoning

Section 58P provides that minor benefits will be treated as exempt benefits subject to the tests in subsection 58P(1) being met and the consideration of associated benefits in terms of subsection 58P(2).

Subsection 58P(1) relevantly provides that where the notional taxable value of the minor benefit in relation to the current year of tax is less than $300 {paragraph 58P(1)(e)} and subject to specified conditions it would be concluded that it would be unreasonable to treat the minor benefit as a fringe benefit in relation to the employer in relation to the current year of tax the minor benefit is an exempt benefit in relation to the current year of tax.

The matters to which regard is to be given include:

Subsection 58P(2) defines an associated benefit in relation to a minor benefit.

The minor benefits at issue here are:

Taxation Ruling TR 2007/12 titled "Fringe benefits tax: minor benefits" contains the ATO view on such benefits.

At paragraphs 9 and 10 it is stated:

Turning to the matters to which regard is to be given in paragraph 58P(1)(f) it is noted that the words "infrequency and irregularity' and "identical or similar" are not defined in the legislation and therefore have their ordinary meaning.

Water supply connection/re-connection

It is understood that generally the relocation of an employee is infrequent and irregular which means that the payment of benefits connected with such a relocation would satisfy the criteria in subparagraph 58P(1)(f)(i) as being "infrequent and irregular".

This view is confirmed when the duration of the employee's posting at the respective new location is considered. In each of the scenarios the recipient employee has either entered into a 12 month lease of a unit of accommodation that is located at or near the new place of employment or has purchased a new home at or near the new place of employment. Each of these actions means that the employee is unlikely to relocate again within 12 months and therefore the benefit is unlikely to be provided again within 12 months. Hence the provision of the benefit can be said to be "infrequent and irregular".

With respect to the matter of "identical or similar" benefits being provided in the current year of tax it is noted that benefits in respect of telephone, gas and electricity supply are provided. The benefits with respect to those utilities are considered to be similar benefits. In each scenario the total of the benefits for all utilities is $400.

In relation to subparagraph 58P(1)(f)(iv) and the practical difficulty for the employer to determine the notional taxable value of the minor benefit it is probable that no difficulty would exist because of the nature of the documentary evidence of the reimbursed expense provided to the employer by the recipient employee.

As to whether the criteria in subparagraph 58P(1)(f)(v) are met it is considered that the need to incur the expense for the water supply connection/re-connection could not be foreseen by the employee and thus it would be an unexpected event that would satisfy sub-subparagraph 58P(1)(f)(v)(A). In addition in the circumstances of each scenario notice of the need to relocate to the new work location was given to the employee by the employer only one month before the relocation date. Thus in view of that relative short notice the relocation itself is an unexpected event.

Further the benefit which was provided otherwise than wholly or principally by way of reward for services rendered or to be rendered by the employee satisfies sub-subparagraph 58P(1)(f)(v)(B).

Therefore on balance, having regard to the way in which the above criteria in paragraph 58P(1)(f) are met, it is concluded that it would be unreasonable to treat the benefit as a fringe benefit.

Accordingly, the payment for connection/re-connection fees for water supply is an exempt benefit under section 58P.

School uniform costs

This expense payment benefit like the benefit regarding the water supply arises because of the relocation of the employee and therefore the matters to be considered and the reasoning are similar to that for the above water supply benefit.

It is understood that generally the relocation of an employee is infrequent and irregular which means that the payment of benefits connected with such a relocation would satisfy the criteria in subparagraph 58P(1)(f)(i) as being "infrequent and irregular".

No similar or identical benefit is provided to the employee in the year of tax.

In relation to subparagraph 58P(1)(f)(iv) and the practical difficulty for the employer to determine the notional taxable value of the minor benefit it is probable that no difficulty would exist because of the nature of the documentary evidence of the reimbursed expense provided to the employer by the recipient employee.

The need for a different and therefore new school uniform could reasonably be anticipated by the employee as a consequence of relocation and the need for the employee's children to attend a school at the new work location. Accordingly such an event cannot be said to be an "unexpected event". However, in the circumstances of each scenario notice of the need to relocate to the new work location was given to the employee by the employer only one month before the relocation date. Thus in view of that relative short notice the relocation itself is an unexpected event. Accordingly, this satisfies the criteria in sub-subparagraph 58P(1)(f)(v)(A).

Further the benefit which was provided otherwise than wholly or principally by way of reward for services rendered or to be rendered by the employee satisfies sub-subparagraph 58P(1)(f)(v)(B).

Therefore on balance, having regard to the way in which the above criteria in paragraph 58P(1)(f) are met, it is concluded that it would be unreasonable to treat the benefit as a fringe benefit.

Accordingly, the payment for school uniforms is an exempt benefit under section 58P.

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